What can governments do about rising worldwide property prices?

If rising property
prices are or are becoming a global problem what
can governments do about it? Million dollar question. There are lots of
reasons why policymakers might look at what’s
happening in the real estate market with a pang of concern. If rising prices for
ordinary single family homes are making it harder for
families to buy and accommodate themselves, that’s
something that governments could care about. The simple fact is that they
could stop a property cycle tomorrow by raising
interest rates. But that would also probably
lead to recessionary impacts as well, really
exacerbating what is already slowing economic growth
in countries like the UK and parts of western Europe. But then there are kind of
more abstruse financial reasons to care about rising prices. Is this a speculative bubble? Will prices suddenly fall
at some point in the future in a way that puts the stability
of the banking system at risk? There probably is
a global solution, but it’s not one that has
much to do with real estate. It’s one that
tries to make banks and financial institutions
safe, even if it’s possible for investors
to lose lots of money by betting on real property. Quite a few governments
have introduced taxes on high-end properties,
or taxes aimed to deter purely
investment purchases or to deter people from
having multiple homes. And it has really sort
of squelched quite a few of the high-end markets. We’ve seen real declines over
the past couple of years. One of the things that’s
happening in New York right now is there’s a
glut of available property at the luxury end. Developers built too
many luxury apartments and they didn’t buy
enough affordable housing. Partly because obviously they
can make a lot more money if they sell luxury
housing than if they sell mid-market properties. The right solution might be just
to try and build more houses. That’s it. They just need more homes. We need more homes. Extra supply kind of will
limit price increases like nothing else. The extremely high house
prices in cities like London mean that it’s not affordable to
live in the city for the people that the city really needs
to be working there in order to function. Key workers like
nurses, but there’s also people with less obvious jobs
but who really still keep the whole system
working, like people who work in Pret a
Manger and cleaners, and just these kind
of armies of people that enable others to
get on with their lives. If they can’t live in the
city, then the whole kind of ecosystem of it
is under threat. So while we can
debate at huge length whether the market or the
government is to blame, there’s certainly a failure
happening there that really needs to be addressed.